What to Watch: The Home Market, Macro Themes for 2024
MILAN — The global geopolitical and economic scenario changed rapidly over the course of 2023 and it was a year marked by conflict, the rising cost of living and limited access to credit for new homes. Furnishings, decor and lighting companies muddled through a year of reckoning, in which they saw their sales fall from record highs after the COVID-19 pandemic.
Now that the dust has started to settle, here are some of the top themes to watch in the New Year.
More from WWD
More in What to Watch: Media and Home
2024 Could Be Another Darwinian Year for Legacy Media
They Were, They Are – Culture News to Watch in 2024
French Luxury Brands Worry Paris Olympics Will Be Bad for Business
The Home Market, Macro Themes for 2024
The Suez Canal: E-commerce for furnishing and lighting brands just started to sizzle after the dawn of the COVID-19 pandemic and the renewed importance of the home. The threat of a larger conflict in the Middle East is looming. One of home’s top luxury and contract markets, the war’s impact throughout the Middle East could potentially hit the core of some of the biggest luxury companies. While the economic effects remain to be seen, the shipping sector has already been hit by the rise of Houthi rebels targeting vessels in the Red Sea, which could lead to a domino effect of worsening scenarios. Indeed, it would be a lot easier for furniture and lighting companies to see their goods travel through the Middle East rather than around the south of Africa or north of Europe. Switching lanes will affect everything from retail prices to energy costs.
China: That leads to China. The country’s slowing real estate market and the effects of mounting corporate and personal debt have cramped consumer spending over the last year, leading to falling prices and rising unemployment. At the same time, worries continue to rise about China invading Taiwan and American companies curbing their dependency on supply chains there. Overall economic growth in China has also slowed. Moody’s sees the country’s annual gross domestic product growth to be 4 percent in 2024 and 2025, down from the 5.2 percent year-over-year posted in the first three quarters of 2023. This doesn’t bode well, particularly for vanguard brands that count China as one of their top markets. The region has already dragged down earnings for most of 2023. For example, Italian wood furniture federation FederlegnoArredo said in its most recent report that this year was dragged down by echoing effects of the war between Russia and Ukraine and a slowing Chinese market.
Interest Rates and Inflation: Furnishing the home with upscale luxury goods depends greatly on the individual power to access financing to actually buy a new home. The European Central Bank is using higher interest rates to control rising inflation. In December, ECB vice president Luis de Guindos said the strategy is working and once they see the fruits of this measure, rates may begin to ease. “Higher interest rates affect levels of economic activity. And when economic activity is dampened, inflation slows. Once we see inflation is clearly converging in a stable manner to our target of 2 percent, monetary policy might then start to ease. But it’s still too early for that to happen.”
In the U.S., Federal Reserve officials seem confident on rate cuts in 2024, although they also have warned market observers not to get too carried away about the timing or extent of them since inflation remains above the Fed’s 2 percent target.
Consumer Spending Slowdown: The French home and decor market took a beating last year, as Habitat France teetered on the verge of bankruptcy, Maisons du Monde posted lackluster earnings and The Conran Shop closed its doors in Paris after more than 30 years, due in large part to cramped spending. Eyes will turn to possible catalysts, such as the 2024 Paris Summer Olympics, to spur a spending frenzy.
Transatlantic Conquests: In 2023, companies like Design Holding, Italian Design Brands and Cassina planted seeds in the U.S., opening directly operated stores with new, savvy interactive formats. By housing their various brands within proximity of one another, these companies are poised to benefit by echoing their brand identity on a larger scale and controlling their own storytelling. Likewise, California-based firm RH opened galleries in the U.K. and in Düsseldorf and Munich, Germany, with plans in the near- to medium-term to open more stores in key cities like Milan and Paris. RH posted a net loss in the third quarter of this year, though, so will the investments pay off? More importantly, will the company be able to convince European consumers of the integrity of U.S.-branded goods? Stranger things have happened. Chief executive officer Gary Friedman defines RH as an American luxury company and compares the future of the brand to that of Tiffany & Co. Lucky for the latter, Tiffany, despite embarking on an arduous journey in a land where Boucheron, Cartier, Van Cleef & Arpels and Bulgari run the roost, was able to sparkle among its European competitors and is expected to do so even more now that it is owned by French luxury giant LVMH Mo?t Hennessy Louis Vuitton.
Artificial Intelligence: Brands with an online presence and multibrand platforms will need to leverage artificial intelligence to help customers find complementary products. The race is on to render upgrading consumer projects via AI an enjoyable and unique experience.
AI will also figure prominently at the upcoming Salone del Mobile. The organization recently launched a new communication initiative produced by French advertising and PR firm Publicis Groupe with the scientific collaboration of Paolo Ciuccarelli, a professor of design and founder of both the DensityDesign Lab and the Center of Design at Boston’s Northeastern University. Together they are using AI in order to understand, analyze and visualize the stories, relationships and emotions that the trade fair brings out throughout the year.
Solve the daily Crossword
